JAKARTA, June 20 Indonesia is drafting a new
mining export tax that would more than halve the base rate to be
paid by miners but doubts remain whether it would be accepted by
major copper miners and end a five-month-old dispute that has
halted concentrate exports.

Indonesia's main copper concentrate producers
Freeport-McMoRan Copper & Gold Inc and Newmont Mining
Corp stopped exports in January when the government
introduced new mining rules, including an escalating export tax.

The two U.S. companies have previously insisted they should
not have to pay any additional taxes because it would violate
their current mining contracts, casting doubt on whether even a
lower tax rate would be accepted by the miners.

Coal and Minerals Director General Sukhyar said on Friday
the new draft regulation meant the export tax would start below
10 percent and would be linked to a company's progress in
building a smelter.

"Yesterday I had discussions with the finance ministry and
they said the draft is already finalized," Sukhyar told
reporters, adding that it been agreed by the mining, industry
and finance ministries.

Finance Minister Chatib Basri said on Friday the draft tax
regulation still needed to be approved by chief economics
minister Chairul Tanjung and President Susilo Bambang Yudhoyono.

The CEOs of both the companies have been in Jakarta in
recent days to meet with Tanjung in a renewed government push to
find a solution.

It is not known whether the CEOs are still in Jakarta.

Sukhyar said both the U.S. miners had agreed to pay the new
export tax rate. However, neither firm would confirm whether a
reduced rate would be acceptable.

"We have not received it yet," Newmont spokesman Rubi
Purnomo said in an email about the new draft export regulation
and rate.

"We are very hopeful that the government will give us
certainty very soon and a resolution that will allow PTNNT
(Newmont) to resume operations in economically sustainable
manner."

Freeport declined to comment on Friday.

The current copper export tax kicks in at 25 percent and
rises to 60 percent in the second half of 2016, before a total
concentrate export ban in 2017.

Yudhoyono's outgoing administration has been trying to force
miners to build smelters and processing plants in Indonesia, but
a lack of progress in ending the dispute has led Newmont to
declare force majeure and Freeport to slash output.

Even if the export tax rate is reduced in the new government
draft regulation and then accepted by the companies, large
hurdles remain before exports can be resumed.

If the new tax rate is tied to smelter construction
progress, although Freeport and Newmont have agreed to conduct a
feasibility study into building a copper smelter, both have
questioned whether it would be economically viable.

Freeport also says it needs the certainty of a contract
extension beyond 2021, before agreeing to invest more than $17
billion needed for a copper smelter and to turn its Grasberg
complex into an underground mine after 2016.

Discussions with Freeport over a contract extension were
continuing, Sukhyar added.

An extension to Newmont's deal, which ends in 2030, is not
under discussion in the contract talks, according to government
officials, with the main issue of concern being a proposed
increase in royalty percentages paid to the government.
(Reporting by Wilda Asmarini and Michael Taylor; Additional
reporting by Adriana Nina Kusuma; Writing by Michael Taylor;
Editing by Richard Pullin and Muralikumar Anantharaman)

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